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For many seniors, student debt eats into Social Security

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College loans are often thought of as a financial roadblock for millennials, but there’s another group for whom student debt may be even more of a headache: older Americans. 

People over the age of 50 are the fastest-growing group with student debt, even outpacing younger generations, according to a report from the Government Accountability Office. As a result, over the last decade student debt loads for Americans ages 50 to 64 have more than quadrupled, soaring from $43 billion to $183 billion.

That’s painting an increasingly dire picture for older Americans with student debt. While juggling repayment and daily bills are never easy, borrowers over the age of 50 don’t have the decades of earning potential ahead of them that younger people do. The strain may be even greater because federal law allows the government to garnish the Social Security benefits of borrowers over the age of 50 who have defaulted on their school loans. 

In 2015 alone, the government took $171 million in Social Security payments from older Americans who defaulted on student loans, the study found. That contributed to pushing tens of thousands of seniors below the poverty line, the report suggests. 

“This report shows us that seniors clearly aren’t immune to the student loan crisis -- they’re deeply impacted by this issue to the point that it’s leaving many of them in a dire financial situation,” Senator Claire McCaskill, D.-Missouri, said in a statement. “We could have hundreds of thousands of American seniors living in poverty due to garnished Social Security benefits if this trend continues, and we shouldn’t allow that to happen.”

Student debt burden 01:03

The number of seniors whose Social Security benefits have been garnished and who are living below the poverty line has swelled from 8,300 a decade ago to 67,300 today. 

Almost four of 10 borrowers over the age of 65 are in default on their student loans, the largest share out of any age group, the study found. By comparison, fewer than two of 10 Americans under the age of 50 are in default. 

“The hard-earned Social Security checks that are the sole source of income for millions of seniors should not be siphoned off to pay interest and fees on student loan debt,” said Senator Elizabeth Warren. D.-Massachusetts, in a statement. She and McCaskill asked the GAO to provide information about how Social Security garnishment impacts seniors, and how long the garnishment lasts. 

Unfortunately, many older Americans die while still owing money on their student loans. About 13 percent of Americans over the age of 50 pass away while still holding outstanding college debt. 

So why are so many older Americans increasingly mired in student debt? They are typically people who took out their loans during their mid-career years. About six of 10 took out their loans while in their 30s and 40s, which underscores the difficulty of taking on thousands in college debt while hitting one’s prime working years. That is typically when people are hitting milestones, such as raising families and buying homes. 

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Older Americans are also increasingly holding low-wage jobs, according to research published earlier this year by Teresa Ghilarducci, professor of economics at The New School for Social Research. She found that slightly more than 27 percent of full-time workers over 55 years old held low-paying jobs in September, compared with 19 percent of younger workers. In some cases, older workers lose their middle-income jobs and are forced to accept lower-paying work in retail or health care to make ends meet. 

The older borrowers who have their Social Security benefits garnished tend to owe less than $10,000, which suggests they may be struggling to make ends meet. The typical amount taken out of seniors’ Social Security checks was about $140, the study found. 

Although the agency isn’t allowed to withhold more than 15 percent of a senior’s monthly check, the garnishment threshold hasn’t been adjusted to reflect the rising cost of living. At the time it was first set, the threshold was above the poverty guideline, but now has fallen below it, the GAO said.

Meanwhile, the number of seniors burdened by student debt is likely to rise, the GAO warned. 

Fixing the issue will require lawmakers to adjust Social Security’s garnishment provisions to reflect the higher cost of living. It also recommended that the Department of Education provide a clearer process for discharging debt for those with disabilities, with the GAO saying the documentation rules “are not clearly and prominently stated.”

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